Monday, March 15, 2010

S&P 400 Mid-Cap versus S&P 100 ($MID:$OEX)

Great chart pattern on the ratio of mid-caps to really-big-caps.



The bottom of that megaphone (if that's really the pattern here) is quite a ways down, isn't it?

I don't deal much with the mid-cap style, but in the newsletter I believe I did mention a potential resurgence the US small-cap style back in early December. But that was then. Right now I see some strong indications that the pump in the small and mid styles has approached its limit. Even if the market stays elevated here, I think the large- to mega-cap end of the market will start to out-perform again.

If you are a trader, I'm not sure if this observation is really worth bothering with. But if you are a long only investor (and have to or want to stay long) it is likely wise to increase your large-cap allocation while booking profits in some of your less big holdings.

Update: Below is a chart of the S&P 600 Small-Cap relative to the OEX. Just so you can compare it to the MID:OEX ratio above.